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To: patron_anejo_por_favor who wrote (133777)	11/9/2001 6:02:07 PM
From: Les H	Respond to of 436258

Pro forma earnings called into question cbs.marketwatch.com By Craig Tolliver, CBS.MarketWatch.com Last Update: 12:01 AM ET Nov. 8, 2001 NEW YORK (CBS.MW) -- Portfolio managers weighed in on proposals offered by the Financial Accounting Standards Board to standardize the reporting of operating earnings, even as Standard & Poor's lobbied the investing community with its own ideas Tuesday. At issue are "pro forma" earnings, which allow companies to exclude certain costs from their profit and loss statements that might otherwise affect the actual earnings of the company. Nine out of 10 portfolio managers believe that corporate financial reporting needs to be upgraded, though most would oppose an outright ban on pro forma reporting, according to a recent survey of fund managers by New York-based Broadgate Consultants. "It is noteworthy that investors also appear to recognize the obvious limitations with pro forma results, but consider such reporting valuable in assessing the ongoing performance factors driving the businesses they follow," observed Broadgate Chairman and CEO Thomas C. Franco. Portfolio managers were nearly evenly divided as to whether or not FASB should broaden the scope of its project to require companies to include financial metrics such as ratios in their statements. Of the 223 managers surveyed, 47 percent say FASB should act, but 44 percent are against it. "There have been so many charges over the last several years, and also accounting changes which companies are really forced to make that have the potential to distort the results. I don't think this is any bigger issue (pro forma) than any of the others," commented Duncan Richardson, chief equity investment officer at Eaton Vance, who also manages the firm's $1 billion Tax-Managed Growth Fund (CAPEX: news, chart, profile). Almost all managers polled, 95 percent, would like more consistency in how EBITDA -- earnings before interest, taxes, depreciation and amortization -- is calculated. Sixty percent of managers want more information about intangible assets, and six out of 10 want more detailed disclosures about internally generated intangibles, such as the value of brand names, customer lists, among other items, the study said. "There's been a great groundswell, a crying need for some sort of standardized definition of operating earnings and investment houses have come to us saying would you take the lead on this since no one else was," noted Robert Friedman, an analyst with Standard & Poor's who helped prepare a white paper on the subject delivered to Wall Street executives Tuesday. "We believe that creative accounting techniques and measures developed over the past decade has definitely clouded the quality of the earnings picture, which makes it harder for investors to compare one company's results to another's," Friedman argued. Thus far, there's been no communication between the FASB and S&P on the matter. Friedman acknowledged but didn't rule out the possibility that they could jointly work on standardized procedures down the road. Craig Tolliver is the mutual funds editor for CBS.MarketWatch.com in Los Angeles.